Publish, and let us damn the bad banks

Saturday 30 May 2009 19.01 EDT
First published on Saturday 30 May 2009 19.01 EDT

Around the watercooler we've all been moaning about banks for some time, but figures from the Financial Ombudsman Service last week show that over the past year, record numbers of us have been lodging official complaints about them, and other financial providers.

The FOS says that to April this year there was a 14% increase in the number of disputes it dealt with. While that says something depressing about the state of our financial institutions, it also leads to the next encouraging statistic: the ombudsman is upholding a record 57% of these cases in favour of the consumer.

But how do you avoid those dodgy banks, building societies and insurers that have, at best, been bad at dealing with their customers and, at worst, been mis-selling products on a major scale? Readers of Cash and other personal finance supplements will be well informed on this. We, and, in particular, our agony aunts and uncles (see Margaret Dibben, back page), have been working for years on exposing the financial service sector's villains.

From September consumers should have an even clearer picture of who's good and bad, when the FOS starts publishing its long-awaited figures on how many complaints it has had about each financial company - naming them and, crucially, how many of these have been upheld in the consumer's favour.

This "list of shame" has been fiercely resisted by many in the financial services sector - and not without reason. Over the eight years that the FOS has been in existence, the companies that have attracted the most and the least complaints have stayed exactly the same. There has been no incentive - other than exposure by us - for companies to pick up their game. Now there will be.

Another downside of the ineptitude of banks, in particular, at dealing with customer complaints, has been the ballooning of "claims management companies": third-party firms that charge consumers an often-substantial fee to tackle financial providers for them.

A whopping 40% of claims brought to the ombudsman in the past year were brought on behalf of consumers by these companies. Yet they offer no additional expertise in getting complaints resolved and can often do more harm than good as they may mask the real story behind the complaint - which, if explained by the consumer, might make redress more likely. Nevertheless, these companies will continue to prosper until banks, insurers and others pick up their game. The fear of holding top spot on the "list of shame" will hopefully go some way to encouraging them to do just this.